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What is your perceive our democratic process operates? Maybe something like this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that used to be how it operated in the past. Not anymore.

The Advent of Shadow Arbitration Panels

In the modern era, international firms, or the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at offshore tribunals made up of commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even businesses operating from this country. Access is granted only to corporations operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums constitute not tangible damages but money the tribunal officials conclude the company might otherwise have made. The government might be compelled to rescind the measure. It will be hesitant to enacting future policies in that area, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as corporations take cues from each other, and hedge funds finance suits for a share of a cut of the takings. The consequence? National sovereignty and democracy are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings enacted by elected bodies is that this provision has been incorporated – absent public approval, and frequently under an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that plans to dig the first deep coalmine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The incoming administration then withdrew the permission the Tories had approved. Currently, this victory could be compromised by an secret arbitration panel reporting to exclusively the entities filing the suit.

During August, a firm whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was convened to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. The public has no clear indication how much this might be. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it seems likely that he will utilise the arbitration process to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has previously started suing another European state with similar intent, seeking a colossal sum: half that state's yearly income. Part of the counsel on his side? a prominent lawyer, married to the former British prime minister.

Trade specialists believe that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter described activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “once firms start to realise the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were met with widespread derision.

That warning has come to pass. Recently, energy and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP